Private credit is fast emerging as a major source of finance for projects in India as several entrepreneurs are looking for short-term debt to bridge the funding gap due to difference in pricing for equity dilution, top officials at PwC India said.
They said while new private equity (PE) investments during the past two years have declined, several public market exits by PEs were observed during that period.
Several companies are likely to approach capital markets in the near future to provide liquidity to PE fund investors.
“We have noticed that demand for private credit has picked up.
"Several large credit funds have started investing billions of dollars in Indian companies — in both stressed as well as the performing credit space,” Bhavin Shah, partner & leader — private equity and deals — PwC India said.
Private credit is offered by PE firms at marginally higher interest rates than syndicated loans.
The private credit firms also help entrepreneurs run a company by helping them with their global experience.
Tax uncertainty is a big concern for the PEs investing in India.
“Even though there is an effort being made by the Centre to bring more clarity on the Indian tax system, we are still seeing several PE funds receive income-tax notices on settled issues,” Shah said.
“This will be India’s decade and PE investors from across the world are planning to invest in the country,” said Eric Janson, global head – private equity, PwC.
According to PwC India, 2021 was the year with maximum investments with massive amounts of private money flowing into the Indian ecosystem.
This allowed record exits for early investors.
Last year also saw record exits through public market sales — a sharp uptick from 35 per cent in 2022 to 51 per cent in 2023 in terms of deal volumes.
The big-ticket exits of more than $20 million in calendar year (CY) 2022 and CY23 were largely driven by public market and strategic sales.
Global PE funds, on an average, have an investment holding period of 6-7 years.
They were able to generate returns of 3.5x–4.5x on their original investment in CY22 and CY23.
